USTR Documents Anti-Investment Climate in Ecuador

By July 5, 2010Trade

The U.S. Trade Representative last week reported on economic conditions in and trade relations with the South American countries eligible for benefits under the Andean Trade Preferences Act: Bolivia, Colombia, Ecuador and Peru. The report is online, “Fifth Report to the Congress on the Operation of the Andean Trade Preference Act as Amended.”

The section on Ecuador is predictably discouraging, detailing the deterioration of the rule of law and the anti-investment, anti-property actions by the government of President Rafael Correa. We’ve documented how the government has favored the $27 billion shakedown litigation against Chevron by U.S. trial lawyers, as well as its attack against the U.S.-Ecuador Bilateral Investment Treaty [BIT]. The USTR report soft-peddles the problems in this area, for example summarizing, “[Developments] in the past year give rise to concerns as to the government’s commitment to international arbitration for the settlement of investor disputes.” Yes, the Executive Branch wants to terminate 13 BITs, and has rejected the arbitration board’s decision in a dispute with Chevron (not related to the lawsuit).

More than Chevron is under attack. From the USTR report:

  • Piracy in products with copyright and trademark protection is pervasive. Pirated CDs and DVDs are found on many street corners and in shops, and the import and sale of products that infringe registered trademarks are common. Sellers of pirated goods sell their illegal wares with little fear of prosecution.
  • [Ecuador] has established two types of compulsory licenses for pharmaceuticals, those for public noncommercial use and those for commercial use…On April 14, 2010, the Ecuadorian government issued its first compulsory license. The license stated that it was for public non-commercial use of an HIV/AIDS treatment drug patented by a U.S. company.
  • Ecuador’s import ban on all U.S. live cattle, beef, and beef products due to BSE‐related concerns following the detection of a BSE positive animal in the United States in 2003 has remained in effect.
  • In international rankings, Ecuador has been reported to suffer from high levels of corruption. Weak judicial institutions, susceptibility to political influence, and lack of transparency in regulatory bodies are frequently cited as root causes of corruption in Ecuador. There are few non-governmental institutions that fight corruption.

The Emergency Committee For American Trade issued a statement from its president, Calman J. Cohen, on the report. Excerpt:

With the continued deterioration of Ecuador’s treatment of U.S. investment and investors, U.S. intellectual property and U.S. farm and manufactured goods and services, Ecuador will need to reverse course to maintain its ATPA eligibility.  ECAT urges the Administration to continue and intensify its work to promote progress on these core economic issues that are undermining the United States’ relationship with Ecuador and that raise concerns about the renewal of the ATPA program, which currently expires at the end of 2010.

Join the discussion 2 Comments

  • Mike says:

    That Henry fellow for sure does not live in Ecuador, the LOCAL investment of Ecuadorian companies within the country went up from US$815’000,000 in 2007 to almost US$1.9 billion in 2009 the biggest increase in 15 years. The source is the Government entity that regulates private companies called in Spanish “Superintendencia de Companias”.

  • Henry says:

    Everything said in the article is correct. However, I’d like to point out that the current Ecuadorian government is in general anti-private investment — not just private investment from the U.S. or other foreign countries. As a result, even Ecuadorian private companies are not investing in their own country and instead moving to more attractive business environments, such as exist in neighboring Peru. Results are obvious. Ecuador is not growing at anywhere near the rate it should be growing.

Leave a Reply